I recently posted EPLI Market Survey 2009, which is our annual Report covering the monoline EPLI marketplace. Incidentally, this is the original market segment we covered in the Betterley Report, and was initiated in the early-1990s, when there were only 5 or so carriers in that line.
My, how times have changed; this issue included 30 different products, including those targeting the largest companies and others for the small and mid-sized employer.
A few observations from that Report:
The EPLI line is mature now, with products (at least the ones we are covering) being fairly similar in terms of the breadth of coverage. Total industry writings seem to be in the $1.6 billion (US) range, which is similar to last year. Claims are generally favorable, but there is an expectation that the severe employment stresses of the economy will generate more claims, and perhaps more hostile juries, than before. Employers are struggling to justify their coverage as they seek ways to cut back expenses, but this would seem to be an odd time to be dropping coverage. There are reports that employers are cuting back on limits, which is probably a more rational response.
There is a lot of pricing pressure on carriers, as agents and brokers seek to get the most competitive price. Somehow, carriers have managed to keep gross premiums at roughly the same level as 2008; we think 2010 rate competition will continue (no turn yet in sight from here).
A few snips from the Report:
The saga of AIG continues to preoccupy the market, with staff changes, alleged price sharpening to retain business, and the overhanging influence of Washington. AIG, now Chartis, continues to be a serious force in the market, apparently retaining most of its book of business. Whether Chartis is under pricing its renewals to retain business, as has been alleged by some carriers, or they are simply acting like any other rational insurer (refusing to lose good customers because of price), is unknown to us. We do know – or at least surmise – that the threat of retention pricing in and of itself helps keep the market soft.
Long time fixture in the EPLI field, Dick Rupp, has retired from Houston Casualty; Dick was one of the pioneers of the EPLI product in California during the 1980s. A valuable contributor as a source of guidance in the early days of EPLI, he will be missed. He was always one of the really good speakers at EPLI conferences I attended, especially on the smaller employer market segment.
Responding to the recession, Chartis Lexington has added new Reduction in Force tools to help its insureds avoid the traps of laying off fellow workers. Lexington has always had a good attitude toward providing its insureds with effective risk management tools, and this is a good example.
On another note, Cincinnati is offering lower policy limits options of $100,000 and $50,000 – perhaps responding to the need for insureds to cut expense. We wonder if this will appeal mostly to existing insureds that don’t want to drop their coverage, but that need to reduce premiums.
Houston Casualty now offers a special Immigration Defense Coverage at no additional cost to qualified insureds, subject to a sublimit. We have seen indications that this sublimit is $25,000.
Interestingly, Professional Underwriter’s Agency, a small but persistent Managing General Underwriter for Lloyd’s in EPLI, is offering an optional Privacy Violation coverage at no additional premium for certain insureds. This coverage responds to concerns over privacy breach, and represents an interesting expansion of EPLI policies to address a major concern of employers these days – the cost ramifications of a breach of private employee records.
Product innovation does continue, though, especially in the area of Wage and Hour claims. Here is what we found about this coverage:
More interestingly, a number of carriers have brought out definitive coverage, including several that did not offer it last year. This coverage can be for Defense Only, or Defense and Settlement, both sometimes subject to sublimits. There are only two carriers indicating that they offer Defense and Settlement coverage – AVEMCO and Evanston (which has an unknown sublimit).
Carriers that offer a Defense Only coverage (all with sublimits unless noted) include the list below; those in bold added coverage this year:
- Ace USA (unknown sublimit)
- Chubb Specialty for private Forefront insureds with fewer than 500 employees; not available in California (unknown sublimit)
- Cincinnati ($100,000 sublimit)
- CNA for private employers only ($100,000 sublimit)
- CoverX (First Mercury) ($100,000 sublimit)
- C.V. Starr (unknown sublimit)
- 5Star (Lloyd’s) ($150-500,000 sublimit)
- Great American (unknown sublimit)
- Houston Casualty (unknown sublimit)
- Monitor (Admiral or Carolina Casualty) (negotiable sublimit)
- NAS (Lloyd’s) ($150,000 sublimit)
- Navigators ($100,000 sublimit)
- PLIS (Lloyd’s) (unknown limit)
- Professional Underwriters Agency (Lloyd’s) –($150,000-1 million sublimit)
- Progressive (unknown limit)
- Travelers’ Private and Nonprofit product – (unknown sublimit)
- U.S. Risk Underwriters (Lloyd’s) – (unknown limit)
I’ll be speaking, and perhaps blogging, from the ACI EPLI Conference in NYC 1/25-26, a good chance to see what else is new.